Investors confident media laws will change

Other related coverage

INVESTORS believe Australia's cross-media and foreign ownership
media laws will be changed, even as Federal Parliament readies for
yet more last-minute lobbying this week.

"I think the market is assuming it's going to get through with a
bit of fine tuning," says Bell Potter Securities research director
Peter Quinton.

"We have neutral recommendations on all our media stocks. With M
& A (mergers and acquisitions) activity on the horizon, it
would be pretty brave to recommend selling."

Thirty-two industry organisations have made submissions to the
Senate inquiry into the proposed reform of Australia's media laws.
Hearings will be held this week.

Analysts agree investors have generally watched and waited amid
uncertainty over whether the media bills, which will abolish
cross-ownership and foreign ownership restrictions and roll out
digital technology, will be passed without major change. But they
say share price premiums built into media stocks perceived as
acquisition targets could quickly evaporate if the package was
derailed.

According to Mr Quinton, the fiscal 2007 price-to-earnings ratio
across the media sector is an average of 17.4 times, compared with
the PE ratio of 15.1 for all industrials stocks.

But another analyst, who declined to be named, said he believed
premiums in the media sector sat closer to 5 per cent, although it
depended on the individual companies.

"The most significant premiums are carried by Austereo and
Southern Cross Broadcasting, and to a lesser extent Fairfax," the
analyst said. But Rob Patterson, managing director of Argo
Investments, which owns shares in media groups such as John Fairfax
and Southern Cross Broadcasting, said he would "not be that brave"
to call an outcome.

"We were buying Fairfax at $3.80 on a fundamentals basis," Mr
Patterson said.

In its submission, radio group Austereo has called for the
abolition of cross-media ownership rules to commercial operators in
metropolitan markets as "soon as practicable". Austereo said
commercial radio was struggling with a cyclical downturn in
advertising revenue and increased competition as it faced the costs
of switching from analogue to digital.

Chairman Peter Harvie said in the submission that "contrary to
the concerns of certain parties", media reform legislation would
not have an impact on competition between various media sectors for
revenue or advertising rates, which he said were set by
advertisers, not owners.

Regional television network Prime, an affiliate of the Seven
Network, said the "four voices" test for diversity would be enough
to protect media diversity in regional Australia.

"It would be inappropriate to mandate employment or other
requirements on regional Australia," it said.

John Fairfax Holdings renewed its call for free-to-air
broadcasters to be blocked from bidding for additional digital
spectrum for mobile television, known as Channel B.

When you see news happening: SMS/MMS: 0406 THE AGE (0406 843 243), or us. More